Toyota To Prohibit Below Invoice Advertising
Toyota has announced their dealers cannot advertise a price below invoice at any of their stores in the United States. The two ways to view this change seem to be that it will result in a higher gross due to higher prices and the feeling that it negatively impacts an advertising method that’s working well. For dealers that advertise prices below invoice and are selling a lot of Toyotas, this move could prove upsetting.
As AN reported, one dealer principal at a Florida Toyota store is upset because he has been advertising 75 percent of his dealership inventory below invoice. This move for him will mean a major shift in advertising. If there are many other dealers who agree with the Florida dealer and don’t like the change, they may be out of luck. The change in policy is expected to go into effect in January and dealers have to comply. Certainly dealers can technically advertise for whatever amount is allowed in their area, however, if Toyota follows Honda the offending dealers could face a financial setback.
Honda’s policy is after a dealership has three offenses of their corporate ad policy, the store loses marketing assistance, which amounts to about $400 per vehicle. Further reports have indicated Toyota dealers who violate this specific ad policy could lose out on other incentives.
There is also a concern that advertising below invoice leads to lower prices and thus less profit. In an interview with Automotive News, Erich Gail, recent DrivingSales President Club Speaker and COO of the Cardinale Group spoke on this subject. Gail explained, “We want to see transaction values hold and appreciate.” Those transaction prices are rising, up $821 from June to July of this year. The fear on the part of some appears to be that advertising lower than invoice prices means less potential for dealers to make money.
Honda was first, Toyota is now second. Do you like the ban on below-invoice pricing? Would you like to see your automaker implement a similar rule? Do you think that these types of policies help or hurt dealers?
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It is VERY good to see Toyota step forward and protect not only the reputation of their brand, but also the value. This hopefully will spell an end for companies like TrueCar that drive markets into “lowest price” bidding wars and customer frenzy. This move will help continue Toyota’s stellar resale values that have been hurt recently by previously mentioned sources. Another added benefit is that it will take good, old-fashioned sales skills to sell, not simply taking orders from customers because you have become the “lowest price winner”.